What is a Countervailing Duty?

Define Countervailing Duties.

Countervailing duties (CVDs)

Countervailing duties are tariffs applied to balance (countervail) the effect of export subsidies conceded by the government of an exporting country. Countervailing duties (CVDs) counteract subsidies by national authorities that unfairly enable their companies to export at a lower price.

It is also known as anti-subsidy duties, are trade import duties imposed under World Trade Organization (WTO) guidelines to neutralize the negative effects of subsidies. They are imposed after an investigation finds that a foreign country subsidizes its exports, harming domestic producers in the importing country. The duties are calculated to duplicate the value of the subsidy.

The terms ‘Subsidies and countervailing duties’ are used together as the measures of countervailing duty that are taken against the subsidies accessible to exporters of foreign countries.

 Subsidy may be in the nature of direct or indirect grant on production or exportation of goods and also includes any special subsidy on transportation of any specific product. It is the government that acts either by allowing subsidies directly or by requiring companies to subsidize certain customers.

Countervailing duties (duties offsetting subsidies) do two things: they discipline the use of subsidies, and manage the actions that countries can take to counter the impacts of subsidies.

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